Benefits XBRL brings to the analyst market place and tools for Analysts

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Benefits XBRL brings to the analyst market place
and tools for Analysts
9th International XBRL Meeting Auckland, New
Zeeland May 11, 2004 230 pm 255 pm
Liv Watson, Vice President of XBRL
Strategies XBRL Nordic Country Representative
EDGAR Online Inc
When the Business is Information
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Agenda
Introduction to the US EDGAR System
1
Big Question
2
3
Analytical Tools
4
Microsoft Live Demo - Jon Clemens
5
Conclusion
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Introduction About the EDGAR System
Electronic Data Gathering, Analysis, and
Retrieval

• Purpose To facilitate the filing and review of
  mandated public company disclosures
• 12 years from inception to completion
• May 1996 ALL US public companies required to file
  the majority of their disclosures electronically
• Public website provides access to EDGAR data
• Sarbanes-Oxley Act of 2002 accelerates time frame
  and types of disclosures to be filed
  electronically

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Public Company Financial Information Life Cycle
Periodic Event Reporting (compliance)
Ownership
Capital Raising
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The Scope

• 12,000 public companies
• 2,200 institutions
• 8,000 mutual funds
• 60,000 insiders
• 2 million documents
• 10,000 new documents/day
• 1,000,000 pages/day

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Corporate Filings Data Today
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Information-Intensive Markets

• "The effect that XBRL will have on the business
  community will be more significant than the
  transition from paper and pencil analysis of
  financial information to the use of electronic
  spreadsheets, "In the next three to five years,
  XBRL will move from the early adopter phase to
  become the generally accepted way to report
  business information. As a result, corporations
  will simplify the process for issuing business
  reports, and the public will find it easier to
  get the information they need to make informed
  investment decisions."
• - Mike Willis, Partner,
  PricewaterhouseCoopers and founding chairman of
  XBRL International.

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XBRL Value Proposition
Transparency and the U.S. Securities and Exchange
Commission (SEC)
Business Events
People Practices
Control Practices
Business Events
Business Events
Business Events
Mgmt Reports
Business Events
External Reports
Shareholder View to Business Events
Accounting Practices
Business Events
The SEC is driving for reporting
transparency. In many organizations, each step
along the path to the final external reports
clouds the view of information back to the
original business event (inconsistent account
definitions, incomplete GL reconciliation's,
management adjustments, top side entries, etc.)
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Financial Information Supply Chain Todays
External Position
Company Financials
SEC Filings
Public Financials
Company Financials
Market Data
Competitor/Industry Financials
Analyst Analytical Models
Assurance
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Leveraging Technology Today
Proprietary Data Mining Technology Internet
Delivery
Proprietary Data Formats
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Financial Information Intermediary Supply Chain
External Position
Company Financials
SEC Filings
Public Financials
Company Financials
Financial Supply Chain
Market Data
Competitor/Industry Financials
Analytical Models
Assurance
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Agenda
Introduction to the US EDGAR System
1
Big Question
2
3
Analytical Tools
4
Microsoft Live Demo - Jon Clemens
5
Conclusion
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The Big Question Is XBRL a Disruptive
Technology to the Financial Intermediary Market?

• Disruptive technologies  
• Products based on disruptive technologies are
  typically cheaper to produce, simpler, smaller,
  better performing, and, frequently, more
  convenient to use.

Professor Clayton Christensen of Harvard Business
School The Innovator's Dilemma.
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Industry Changes with XBRL?

• Will the availability of XBRL tagged information
  facilitate the preparation of customized reports?
• Will the cost of content development increase?
• Will the costs of data distribution decrease?
• Is there going to be a shift of the costs of data
  manipulation to application software developers?
• By the nature of its self-explanation (with
  tags), will data be more accessible and
  available?
• Substantial reductions in data tailoring costs?
• Reductions or increases of revenues in the
  industry?
• Reductions in software tailoring costs and
  revenues in the software integration industry
  (e.g. EDS, IBM, Accenture)?
• More emphasis on analytics?
• What type?
• Semantic analysis?
• Information agents?

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Agenda
Introduction to the U.S.A. EDGAR System
1
Big Question
2
3
Analytical Tools
4
Microsoft Live Demo - Jon Clemens
5
Conclusion
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Analytical Scoring Tool of the Future
Exploits both qualitative and quantitative data

• Purpose electronically examine filing
  information based on user defined parameters
• Benefit spend more time ranking, analyzing,
  acting spend less time identifying problems

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Sample Data Sets
Quantitative
Qualitative
Text
Corporate
Institutional
Search
Text
Financials
Governance
News
Ownership
Search
8-K
IPO
Insider
Filings
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Quantitative Data Examples

• Current ratio down at least 20 vis a vis last
  year
• Cash flow from operations down at least 10 vis a
  vis last year
• Profit margin is less than the industry average
  by 30 or more
• Revenue deviates by more than 30 of a projected
  linear regression point

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Qualitative Data Examples

• CEO and/or CFO didnt sign 906
• Percent of outside directors outside desirable
  limits
• On Board
• On Audit Committee
• Audit Committee weaknesses
• Fewer meetings than median company last year
• Size of committee below industry median
• Filed 8-K Item 4 (change of accountant)
• Bill and hold within 10 words of revenue or
  transaction

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• Real Time Scoring Engine
• Scoring History Retained and Charted
• Allows Back Testing of Models

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New Application Features Artificial Intelligent
Tools
of defaults debt
High
Central Data Repository
5.
Monitor the health of individual banks as well as
the health of the industry as a whole
Default Dept
Loan Income
XBRL
Low
XBRL as a method to facilitate intelligent agents
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Sample Fraudulent Calculations

• Goodwill over Sales
• Restructuring Costs over Revenues
• Reserves over Total Liabilities
• Prepaid Expenses over Sales
• Debt Retirement Profits over Income
• Cash Reinvestment Ratio
• Accounts Receivable over Revenues
• Insider Sales Activity Levels
• Accounts Receivable over Revenues Volatility Over
  Time
• Cumulative Free Cash Flow over Cumulative Net
  Income
• Inventory Turnover over Average Inventory
• Deferred Income Tax Assets over Current Assets
• Capitalized Expenses over Operating Revenues
• Over-funded Pension Benefits over Employee
• Expected Rate of Return over Pension Assets
• Executive Long Term/Short Term Compensation
  Ratios

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Financial Data Summary
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Report Findings
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Financial Data Summary
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Future Trends
Data Publishing, Analysis and Reporting Traditional Enterprise-centric Data Provider
Audience One-click information consumer Power user that takes training, (or online reader that tackles HTML tables or PDFs)
Type of Data Delivered Self-serve, on-demand, within interactive (OLAP) analysis and personalized reporting functionality Preconfigured reports with static charts and graphs
Type of Data Delivery Distributed widely across the Internet (Web Services) Proprietary systems and internal enterprise systems/intranets
Data Volume Million-record files published online from inexpensive Web servers Terabytes protected by complex and expensive mainframes
Scope of Usage Anyone with a browser and connection to the Internet Select enterprise elites
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Live Microsoft XBRL Demo
Jon Clemens Microsoft Corporation Information
Worker Organizational Solutions Group Solution
Planning Manager
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Agenda
Introduction to the US EDGAR System
1
Big Question
2
3
Analytical Tools
4
Microsoft Live Demo - Jon Clemens
5
Conclusion
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In Conclusion

• Adoption of XBRL will bring democratization of
  financial markets.
• XBRL and other XML derivative languages are going
  to change information generation and
  distribution.
• The information intermediation industry will have
  to change consequently bringing greater
  transparency to financial Information.

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• "The significant problems we face cannot be
  solved at the same level of thinking we were at
  when we created them."

- Albert Einstein (1879-1955)
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Concluding Remarks..
Embrace Open Source Standrds or .....
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Thank you!
Liv A. Watson EDGAR Online Inc Vice President
of XBRL Strategies E-mail lwatson_at_edgar-online.co
m Phone [phone] Web www.edgar-online.com